ARMINGTON ELASTICITY OF TURKEY'S IMPORT DEMAND FOR COTTON

This study estimates Armington elasticity of Turkey's import demand for cotton by using Autoregressive Distributed Lag (ARDL) method. The estimated long-run elasticity of demand shows that policies on cotton prices might have important economic impacts on domestic production and trade in Turkey. According to the results and based on 2014/15 season figures, a subsidy which decreases the ratio of domestic prices to import prices of cottons by 1 per cent would cost an additional 240 thousand US dollars for the budget and lead some 24 million US dollars decline in the value of imported cotton. On the other hand, an import tax which increases import prices at the same level would have the same effect on imports, while raising an amount of 12 million US dollars tariff revenue.